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Meridian Credit Union likes to shake things up every spring. For a few years now, it’s been releasing eye-popping mortgage specials during peak homebuying season, and this year is no different.
Meridian Credit Union likes to shake things up every spring. For a few years now, it’s been releasing eye-popping mortgage specials during peak homebuying season, and this year is no different.The credit union, Ontario’s largest, just launched a 1.98% 2-year fixed that incinerates competing offers.
How crazy is this rate? It is no less than 127 basis points below Meridian’s 18-month GIC rate. Remember when it used to be fashionable to lend for more than you pay depositors?
“Affordability is a challenge in today’s market, so we wanted to show people we have their backs,” said Dayna Whitney, Associate Vice President, Retail Experience at Meridian Credit Union. And based on this promotion, it does.
The details:
- Term: Two-year fixed
- Optional prepayments: 20% a year lump-sum + 20% annual payment increase
- Registration type: Collateral charge (conventional mortgages) and standard charge (insured mortgages)
- Deal types: Owner-occupied primary residence only; purchases and lender switches
- Maximum property value: $1 million
- Maximum mortgage: $925,000 if default insured or $799,000 if 20%+ equity
- Other options: Meridian’s Flex Equity (HELOC) and Friends and Family mortgage (where you can apply with three other people) are also available with this offer
- Stress test: You must prove you can afford a payment based on a 5.34% rate (as of today)
- Available via: Meridian branches and mobile mortgage specialists (not brokers)
Ms. Whitney said there is no deadline on this offer, but it’s available only for a “limited time.” She confirmed that Meridian’s specials have generally lasted a few weeks to a month or so in the past.
Some knocks on this product:
- It’s only in Ontario
- Here’s to hoping its new motusbank subsidiary will make such blockbuster rates available to mortgage shoppers nationwide. It’s scheduled to go live in April-ish, we hear.
- It’s not available on refinances
- This means, if you’re with another lender and your mortgage is a collateral charge, you’re out of luck.
- If you have a secured line of credit in second position and that lender agrees to postpone it behind Meridian’s first mortgage, that’s okay.
- Meridian doesn’t cover switch costs (roughly $800-1200) when moving from another lender
- Collateral charges are often more expensive to switch at maturity
- Not applicable if you’re getting an insured mortgage.
- In the past, some commentators have slighted these specials, claiming the credit union gives subpar renewal rates. That’s just competitors being crybabies. Meridian mortgage rates are usually transparent and competitive.
- Worst case, you’ll enjoy massive net savings in the first two years, even if you change lenders and pay the switch fees.
Our Take
The rate savings on 1.98% is enormous, assuming your mortgage is a good size.
Consider that the next best two-year fixed rates are 3.18%+. At that rate, and given a $300,000 25-year amortized mortgage, Meridian is saving borrowers almost $7,000 over two years. Incredible!
Spy Tip: Click here to compare your rate savings
And the timing couldn’t be better. With Canada’s yield curve looking flat as a board, recession risk is up and the rate outlook for the next two years is sideways to down. The probability of making new highs in the 5-year bond yield, which guides most fixed rates, is likely less than 10% through 2019-2020. That suggests renewal risk in two years is less than normal. (Of course, that is all according to analysts and implied market probabilities, for what those are worth.)
As for why other mortgage providers can’t offer this sort of rate, that’s a good question for your lender. Ask it.
23 Comments
DUCA Financial is better. Next credit union that’s coming up and soon to take number one spot.
Does it mean mortgage with 20% down would have a collateral charge? I specifically asked for non-collateral mortgage and the agent said it’s a standard mortgage and no charge associated with it.
why are variable rates getting close to fixed rates why take the risk just sign fixed rate have no worries
This rate makes variable rates irrelevant unless you’re refinancing. Too bad it’s only in Ontario and not available on refis.
“DUCA Financial is better.”
LOL. What a compelling argument. Thank you for that insight.
Wow that is a wonderful amezing rate, I really love it, and I’m also very impressed.
My wife and I are planing and looking on buying a house now.
At 1.98%, is there any reason not to get this rate?
whats the difference between a refinance and lender switch?
A refinance means you’re increasing the risk of the mortgage. For example: adding new money to the mortgage or extending your amortization, changing who is on title, etc.
A switch is when you simply transfer your existing mortgage to a new lender with no increase in risk, meaning no increase in the amount, amortization, etc.
Note that most lenders do not let you “switch” if your existing mortgage is a collateral charge. Almost all mortgages with lines of credit built in have collateral charges.
is this rate valied for 30 year mortgage?
Nope. 25 year maximum.
Do you need mortgage insurance?
It says upto 95% of value, but what if you are below 80%.
Thanks
It is no problem if the loan-to-value is below 80%
Here is another downside of Meridian. They will not port a borrower’s existing CMHC insurance policy. If you have an insured mortgage and move to Meridian, they re-register the mortgage and you lose your default insurance. That is bad because insurance gets you better rates if you switch lenders later.
We tried to get this rate and it was a total scam. Jumping through hoops telling us they only accept 25% of a commission based income. We eventually put on co-signers and were still declined. Had 4 people on the mtg each making over a 100k no debt, outstanding credit. How an income of 400k with no debt gets declined I have no idea. They came back saying they would approve a conventional mortgage at a higher rate.
Sally
How is it a scam if you don’t qualify? Why exactly did they tell you that you were declined after you added those co-borrowers?
“We tried to get this rate and it was a total scam”
How it is a scam if you do not qualify for it? We’ve qualified no problem with them at the branch (mortgage amount of 650k) and they went an extra mile to get this happen.
Hey, I have an existing 5 year insured variable and was hoping to break it and take this rate, I secured this rate online for 90 days but when I called the branch, they said that this rate is not available for refinance. Would my breaking previous mortgage and taking new mortgage without increasing the balance, considered as refinancing?
I’m guessing your mortgage is probably a collateral charge? Who is the lender?
If it is a collateral charge or you are changing anything with the mortgage (like the amortization), Meridian cannot switch it. It would have to be refinanced. As it says above, this offer is not available on refinances.
I want to apply for this rate.
My mtge with CIBC is up for renewal on 25 April,2020.
My amount is 243,000.
My income $46,000
I’m 78 yrs old.
I run my home as B and B 4 months per year and make ADDITIONAL 18,000 pa.
My friend suggested I call you to discuss mtge.
Hi Jean, This is an old rate that is no longer available.
Hello Spy,
If rates stay within a +/- 25bps band for the next month, do you think we would see these 2% types of rates again this spring?
Most of the rates along the rate curve are 50bps lower this year compared to this time last year, and everyone wants to grow their mortgage book so I think it is looking favourable for people who want to switch and save.
Funny enough (or not funny depending on your point of view) I think the biggest barrier for people to move to a new contract will be the stress test rate at 5.19%
Hi Ray, There’s a good chance we will…particularly from a non-Big-6 Bank.
And yes, the 5.19% benchmark rate is a deal killer for roughly 1 in 10, or whatever the latest number of non-B-20-compliant prime borrowers is.